How to Open a Roth IRA in Under 30 Minutes

You need to do this today.

Single moms – women in general, actually – are waaayyyyyy behind when it comes to retirement savings. We all have plenty of reasons for this… but when we’re 80 and out of money, those reasons won’t matter at all.

So today we are going to take 30 minutes to open up Roth IRA accounts.

We’re focusing on Roth IRAs specifically because you always have free and complete access to the money you put in. This takes a huge barrier out of the way of retirement savings: This money is not locked up, and you can take it out if you need to without taxes and IRS penalties.

Even with that open access, you still get the benefits of 100% tax-free earnings and growth with a Roth IRA. That lets your money grow faster… so you can build wealth and financial security faster.

Here we go.

What You Need to Know About Roth IRAs

Before we get started, here’s a quick overview on Roth IRAs and why they’re so great, especially for single moms. A lot of people avoid them because you don’t get an immediate tax deduction for a Roth IRA contribution… but they can be much better for your finances in the long run.

As long as you follow the rules, the amazing benefits of Roth IRAs include:

  • 100% tax-free earnings… you pay ZERO TAXES when you take money out
  • ability to withdraw your contributions at any time with no tax consequences
  • you don’t ever have to take money out if you don’t want to (other retirement accounts like traditional IRAs and 401ks force you to take money out every year after you hit retirement age)

But to take advantage of those benefits, you have to open and fund your Roth IRA account… the sooner the better.

You can always find the latest rules – and they do change – concerning Roth IRAs on the IRS website.

4 Steps, 30 Minutes

Opening a Roth IRA is quick and easy, once you know what to do. It only takes about 30 minutes – maybe even less. So carve out that time. Your financial future is totally worth it.

Let’s get started.

Step 1: Choose a provider

To open any kind of investment account, including a Roth IRA, you need a brokerage firm. They’re the companies that help you buy and sell investments. All of them let you open and fund retirement accounts online.

If you want to choose and control your investments, go with a regular online broker to set up your account. Most offer lots of free tools to help you compare and analyze investments so you can make fully informed decisions. You’re in charge of when you invest, which investments you buy, and whether you want to make changes.

Online brokers that offer no fee (for account maintenance), no minimum Roth IRA accounts include:

There are many other online brokerage firms, so take a few minutes and check some of them out to see which feels most comfortable to you.

For a totally hands-off approach, consider going with a robo-advisor, an automated program that builds and manages your retirement portfolio (rather than a person doing that). With these accounts, all you do is put money into your Roth IRA account and the robo-advisor makes all the investment choices for you. Of course, they charge fees for that service, but they’re usually pretty low – and definitely much lower than if you used a human financial advisor.

Low-cost robo-advisors include:

Once you choose your provider, it’s on to the next step: Opening the account.

Step 2: Open Your Roth IRA

It takes around 10-15 minutes to open your Roth IRA online. Once you’ve chosen your provider, go to their “open an account” page and get started.

All providers ask for the same basic info, so have this stuff handy:

  • Social Security number
  • Driver’s license or other official ID
  • Bank account info, including routing number and account number
  • Name and address of your employer (which can be you if you’re self-employed)
  • Name, address, and Social Security number of your account beneficiary (they get the money if you die)

Once that’s all done, you’re ready to put some money in.

Step 3: Fund Your Roth IRA

Now that your account is open, you can start making contributions to your Roth IRA. To do this, you have a couple of options: Send checks in the mail, or make direct transfers in from your bank account.

You’ll also be able to choose between setting up recurring investments, so you can contribute a little at a time, or one big lump for the year. Make sure you don’t deposit more than the IRS annual maximum contributions for the year. For 2020, you can put up to $6,000 into your Roth IRA, with an extra catch-up contribution of $1,000 if you’re age 50 or older.

Be aware that contribution limits are subject to change every year, so check out the IRS website for the latest rules.

As for deadlines, you have until April 15, 2021 to fund your 2020 Roth IRA.

Now that your account has some cash in it, you’ll take the final  - and super important – step.

Step 4: Choose Investments for Your Roth IRA
Even if you went with a robo-advisor in Step 1, read this section anyway. It’s important to know how to choose your own investments even if you prefer not to do it.

Skipping step 4 is a super common mistake among Roth IRA beginners. Many people think that a Roth IRA is an investment on its own… but it’s not. It’s an investment account. And once it’s funded, you need to choose investments to fill your retirement portfolio. If you don’t invest the money in your Roth IRA account, it will just sit there like cash in a savings account – and you’ll miss out on potential growth and earnings.

The brokerage firms listed above – and most of the rest – offer a wide variety of investment options for Roth IRA accounts. Look at the mutual fund and ETF (exchange-traded fund) options first. Both types of funds let you buy whole baskets of stocks or bonds with each fund share. That gives you the opportunity to invest in hundreds or thousands of stocks and bonds for much less money than if you had to buy them all individually.

You Just Funded Your Retirement

Take a minute to be proud of yourself. You just took a huge step on the way toward your future financial security. You opened a Roth IRA. You funded it. You chose investments.

Now make it a habit to keep adding money to your Roth IRA. It doesn’t have to be a lot. It doesn’t even have to be the same amount every month. Every single dollar you contribute to your Roth IRA adds the potential for hundreds or thousands of dollars for you to enjoy in retirement.

Want to learn more about how you can build a supersized nest egg to fund your dream retirement?  Grab a copy of my book Retirement 101 to find out everything you need to know about financial independence.

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